The subsidy mechanism is seen as highly ineffective due to limited availability of funds. A new rooftop policy based on net metering is on the anvil
The solar industry believes access to finance, not sops, will be key for rooftop installations to take off, as it remains unruffled by the government’s recent proposal to cut subsidy.
Despite the provision of subsidies, solar rooftop installations have performed way below targets. Of the 358 MW rooftop solar projects sanctioned by Ministry of New and Renewable Energy (MNRE), only 42 MW of rooftops have been installed so far.
The subsidy mechanism is seen as highly ineffective because not enough funds are made available, delaying or entirely stalling projects. Also, there is a demand for standardisation guidelines for installations and grid inter-connectivity instead of channel partners, though this mechanism helped to ensure quality to some extent.
Large players such as Tata Power Solar are reported to be building a strong position in the EPC market. Tata claims leadership position in industrial and commercial rooftop segment with a market share of 15 per cent.
“The government should focus on enabling the market, not on managing it,” says Tobias Engelmeier, Managing Director, Bridge to India, a leading solar consulting firm. The firm projects India’s rooftop solar market capacity to reach 1500 MW by 2018, from 285 MW as of October 2014, driven mainly by commercial and industrial segments.
The government has set an ambitious target of adding 40,000 MW by 2022 through distributed and rooftop solar projects. It aims to add 10,000 MW in the next three years. These targets are part of the Indian government’s ambitious goal of achieving 100 GW by 2022 in solar.
Centre has planned to cut the subsidy on rooftop solar plants to 15 per cent from 30 per cent due to decline in price of solar panels, large target set for rooftop solar power plant and limited availability of funds for subsidy.
On the other hand, though, the economic viability of this solar segment has been rapidly increasing. Over 40 per cent of the Indian states have achieved grid parity in commercial rooftop. With Accelerated Depreciation (AD) benefits, a same percentage of states see viability in industrial segment.
This makes a subsidy-free scheme possible, the industry feels, but with a focus on easy consumer financing options.
| Centre has set an ambitious target of adding 40,000 MW by 2022 in rooftop segment |
| Of the 358 MW rooftop solar projects sanctioned by MNRE so far, only 42 MW of rooftops have been installed. |
| Commercial and industrial rooftop segments have already seen viability in several states. |
| Centre has planned to cut the subsidy on rooftop solar plants to 15 per cent from 30 per cent |
The industry does welcome the RBI’s recent move to bring the renewable sector under the ambit of priority sector lending but it now wants the financing process to be free of hassles.
“Currently, simple consumer financing solutions for solar installations are largely unavailable in the market,” says Mr. Engelmeier. “Many consumers may not have the liquidity to pay for the entire solar system upfront. This capital expense will have to be financed by scheduled commercial banks, non-banking finance companies or co-operative banks in the same way they will finance a car loan or any other personal loan.”
So, rooftops are already viable without subsidy for the commercial and industrial segments in several states. These two segments account for more than half of capacity addition so far. The residential segment, which is seen having a bigger potential, is also expected to be viable in the next few years. Power tariffs in residential segment are now subsidised across the country.
“The residential segment is very impressive. But the challenge is the residential electricity is now subsidised. But it will pick up momentum in the next few years,” says Pashupathy Gopalan, head of Indian operations and President-Asia Pacific, SunEdison.
The challenge in the commercial segment lies in getting access to the roof area for 20-25 years. “The commercial rooftop space, like in a hotel or a hospital in India, is a valuable real estate with many competing uses and thus becomes hard to dedicate the space for solar project for a longer period in a contracted arrangement,” he says.
